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Rebound intact as Chinese trade surges

China's economic rebound was evident as the first hard economic numbers of the year, released on Friday, showed a surge in exports and imports that was not solely explained by the timing of the Lunar New Year holiday.

Exports grew 25 per cent year-on-year in January versus a forecast of 17 per cent in a Reuters poll, while imports surged 28.8 per cent to comfortably beat a consensus call of 23.3 per cent. January's trade surplus was $US29.2 billion versus a market expectation of $US22 billion.

"I think the Chinese New Year effect only explains part of the story," Zhang Zhiwei, chief China economist at Nomura in Hong Kong, said. "After controlling for the Chinese New Year, the numbers are still very strong and shows the economic recovery is on track."

Global markets have been buoyed in part by expectations of a surge in China's export growth and an easing of inflation to 2.0 per cent from December's seven-month high of 2.5 per cent when January data are published.

Tao Wang, China economist at UBS in Hong Kong, said the growth in imports was key for investors trying to assess the strength of demand in the domestic economy.

"It seems to me that imports were particularly strong and that reflects two things: one is that the domestic demand, in particular investment demand, is very strong. The second thing is that it seems that companies are restocking ahead of the Chinese New Year and ahead of the peak season in March and April," she said.

Analysts, however, are wary of reading too much into data coming just one month after the world's second-biggest economy posted its slowest full-year expansion since 1999 at 7.8 per cent.

China publishes the bulk of its economic data for January and February combined in March to smooth the effects of the annual shift in the Lunar New Year holidays when many factories shut for at least a week and often longer. The holiday fell in January in 2012 and will be in February this year.

Meanwhile the easing of inflation forecast for January is not expected to persist, with a rebound seen building alongside the broader economic bounce - albeit not one that is likely to be strong enough to breach 3.5 per cent, a level that economists think the government will soon announce as its 2013 target.

The trajectory of money supply remains key against that backdrop, with bank lending a focal point for investors trying to assess the bias of monetary policy as loans are made at Beijing's behest in the state-directed financial system.

China's new yuan loans may have totalled 1 trillion yuan in January, according to a Reuters poll - up sharply on December's 454.3 billion yuan and November's 522.9 billion yuan.

A surge could indicate a supportive policy stance - despite the PBOC's inflation alert - as well as strong credit demand in the real economy, but it could just as easily show banks flush with fresh state-directed lending quotas and anxious to put them to work early.